am I being taken advantage of by the bank

Hello Carolyn,

There are two types of insurance involved with a situation like this. The Federal Mortgage Insurance which is paid for via a set-aside fund, is a federally mandated requirement for reverse mortgages, and generally cannot be changed.

However, if your bank is also issuing you your homeowners' insurance, then you may wish to shop around for a cheaper alternative. While I am not familiar with any statute that prohibits your lender from doing this, you are correct that it may result in double-dipping as it were. Consider looking into alternate providers of homeowner's insurance. Switching providers does not alter the terms of your reverse mortgage.

You're probably not being taken advantage of. My guess is that your reverse mortgage loan consultant isnt explaining it well enough. HECM loans are so regulated, that its nearly impossible for a lender to abuse a senior. Like one of the previous posters stated. There can be several types of insurance in a Reverse Mortgage. MIP or Mortgage Insurance Premium is 2% of the appraised value and goes straight to FHA. After the loan closes, there is a half percent that accrues on what you have borrowers, that is 1/12 of .5% per month. This does a few things. it protects you and the lender a in the event that home values go down, you or your heirs can never be upside down in a reverse mortgage, and will never owe more then the home is worth. Secondly, if you take the proceeds as a line of credit, the lender cannot arbitrarily decrease the line amount (thats happening quite a bit right now with traditional equity lines of credit). Finally, if something were to happen to the lender, the loan seamlessly goes to FHA without any disruption in service to you. Homeowners Insurance is exactly that. You chose who you wish to use. The lender may ask you to get more insurance, as there are minimum guidelines. In the 8 years I have been originating reverse mortgages, this has only happened twice, so you are probably adequately covered. The processor or loan officer will let you know. Title Insurance. This is the insurance you hate to get and pay for. Its used during the escrow/loan process to guarantee the lender (and you) that there are no title or ownership issues on your home. Trust me here, when you need this insurance, youll be happy you had it, as it could mean losing your home. Flood Insurance. If you live in a flood zone, you are required to obtain flood insurance to get an FHA loan. If the lender is asking you for other types of insurance, let me know. Ill help you figure out whats going on. But frankly, your loan officer should be guiding you through the process.

Very Odd...That was a nicely formatted reply when I posted it, now its a big blob of words.

I apologize that its hard to read.

Tam

What is the value of your home, and how much is the Mortgage Insurance premium you're being charged? If the insurance premium is 2% of the value of your home, you're not being over charged.